Prioritizing Quantum Computing Applications for Business Advantage

Research Insights Prioritizing quantum computing applications for business advantage

Charting a path to quantum readiness How IBM can help

Enterprises around the world are in various stages of assessing and experimenting with quantum computing applications for their business success. This IBM Institute for Business Value Research Insight provides an innovative quantum prioritization matrix to help these enterprises understand and select applications based on factors such as their ability to provide “quantum speed up” and “time-to-value.”

Therefore, this report is intended for quantum decision- makers, funders, designers, and programmers as well as anyone else with a deep interest in the future of quantum computing. For more information, please visit ibm.com/ quantum-computing. By Dr. Elena Yndurain and Lynn Kesterson-Townes

Talking points Quantum investment Quantum disruption is accelerating Quantum computing is likely to disrupt Investment in quantum technologies is booming. business operations and industry value A veritable who’s who of technology companies are developing quantum computers, custom semiconductors, chains. Now is the time to engage. and communication devices. Government investments are Many initial quantum applications and equally significant, ranging from USD tens of millions to algorithms will be proprietary to the billions in countries and confederations such as China, the US, Canada, the UK, the European Union, Israel, Australia, individual enterprises or ecosystems and Russia.1 that develop them. Even though universal quantum computing has not yet Quantum prioritization reached mainstream commercialization, we predict specific applications could confer significant competitive The path to quantum adoption requires advantage for some organizations in the coming years. informed decisions about which quantum Almost all organizations—90 percent according to Gartner— computing use cases are key to specific will be active in quantum computing projects and utilize quantum computing as a service by 2023.2 As a result, the business needs. Prioritizing these use overall quantum computing market is forecast to reach cases is a critical undertaking. USD 240 million by 2025, a 48 percent compound annual growth rate (CAGR).3 Many quantum applications—even Use case selection early ones—are expected to have significant disruptive Identifying a diverse mix of use cases helps implications for industries and businesses. As a result, many of today’s business leaders may need to investigate prepare an organization to respond rapidly the advantages of quantum computing just to preserve to breakthrough advances in quantum marketplace viability. computing technology. As quantum technology moves closer to commercialization, specific applications are emerging in areas such as chemical modeling, scenario simulation, optimization, and artificial intelligence/machine learning. For example, some quantum algorithms offer theoretical (and significant) speed-up over classical solutions, particularly for such thorny math problems as solving linear systems, searching unstructured data, conducting Monte Carlo simulations, combinatorial match, and number factorization. These algorithms are now being tested to identify the business advantages they may potentially deliver.

1 Rapid growth. Getting ready for Through 2025, the quantum quantum computing computing market is forecast to grow at an annual compound As quantum computers begin to become commercially growth rate of nearly 50 percent.4 viable, businesses will need to explore and assess potential applications specific to their competitive contexts. And because of their computational power Earnest experimentation. and speed, some quantum applications may yield early, Since 2016, when IBM launched proprietary quantum advantage that could meaningfully affect business models or industry value chains. Because the first quantum computing cloud quantum is a new type of computing, early familiarity and service, a global community of assessment are critical for rapid adoption once the users has performed hundreds technology is ready for widespread use. of billions of executions using Prototype quantum systems already exist and are available quantum systems.5 to the general public at no cost. At the end of 2019, more than 200,000 users had run hundreds of billions of executions on IBM’s quantum computers and simulators through Revenue impact. the IBM Cloud. Based upon these experiments, more than When fault-tolerant systems are 200 third-party research papers on practical quantum achieved in a single industry— applications have been published.7 financial services, for example— Evaluating the potential business impact of quantum quantum computing could computing applications can be challenging, particularly drive more than USD 10 billion given the complexity of this emerging technology. of revenue in the first year of Organizations need a way to evaluate which potential quantum computing applications are better positioned to 6 adoption. deliver optimum business benefits for them.

2 A quantum computing “prioritization matrix” helps organizations address this need. Executives from various Insight: What is quantum disciplines—including strategy, operations, innovation, computing? IT, and risk—can evaluate the potential impact of quantum computing on their businesses, prioritize quantum applica- “Classical” computers represent data as either a one or a tions, and subsequently measure quantum advantage as zero via a bit. Quantum computers can represent data as their organizations move from early adoption to a one or a zero, or as a combination of a one and a zero via mainstream quantum computing. a qubit. Qubits can be in multiple basis states at the same time, which is known as quantum superposition. Next is Our prioritization matrix categorizes quantum computing the peculiar phenomenon of quantum entanglement. applications into four distinct categories: Due to entanglement, even though two or more quantum objects may be physically separated, their behavior – “Early Bloomer” applications are the most feasible to contains correlations that cannot be realized classically. implement today Finally, quantum states can undergo interference to – “Late Bloomer” applications promise significant add and cancel wave amplitudes. These three quantum quantum advantage in the future mechanical properties provide the potential exponential computational speed up of qubits.8 – “Wild Card” applications may or may not ultimately deliver clear business advantage – “Mature Industry” applications can deliver competitive Insight: “Quantum advantage” advantage on a business scale. Quantum advantage is the point where, in certain cases, quantum computers can demonstrate a significant performance improvement over today’s classical computers for a certain problem. “Significant” means that a quantum computation will be either hundreds—or thousands—of times faster than classical computation, will need only a fraction of the memory required by a classical computer, or can perform tasks that simply aren’t possible with today’s mainstream technology.

Source: IBM Institute for Business Value.

3 Insight: Are there quantum A proven prioritization framework Our quantum prioritization matrix, illustrated in Figure 1, computing applications helps executives evaluate each application in three relevant to the advancement dimensions: 1) its theoretical capacity to deliver technological advantage over classical computing of your business? solutions (Y-axis); 2) its operational readiness (X-axis); and 3) its ability to drive unique business value for a specific To leverage quantum computing sooner rather than enterprise (bubble size). later, the following steps can be helpful: Prioritizing quantum applications in this way provides – Assess your enterprise’s inefficiencies that a complete portfolio overview, visually graphing an classical computers cannot currently improve, organization’s decision trade-offs. As a result, executives such as those associated with product can make more informed decisions about their development and operations. Examples include organization’s quantum adoption based on their strategic problems with complex interdependencies, such priorities, such as following a first-to-market strategy, as simulating molecules for materials or drug a cost-optimization approach, or acting as an industry development or constructing interdependent disruptor. work schedules. – Determine when your business is forced to employ approximations to respond to pressing Figure 1 market demands. Examples include problems involving complex networks such as distribution, Quantum prioritization framework transportation, communications, or logistics. – Evaluate whether your organization is encountering difficulty in comprehensively computing large amounts of complex data in a timely manner. Examples include adaptive Use case C customer and vendor interactions, proactive executive decision support, targeted employee training, and other AI applications.

Use case B

Use case A Quantum speed-up

Near-term technical feasibility

Ability to drive unique business value

Low High

4 The Y-axis: quantum speed-up Determining speed-up Overall, the promise of quantum advantage is to efficiently solve particular business problems that are not currently Several algorithms already present quantum speed-up. feasible (or prohibitively expensive) to resolve due to Quantum Amplitude Estimator (QAE) boosts the success today’s computational constraints.9 Correspondingly, probability in algorithms that leverage random distributions, where an application sits on the quantum prioritization and Quantum Support Vector Machines (QSVM) map data to matrix’s Y-axis is dependent upon the theoretical larger dimensions using quantum kernels that cannot be magnitude of improvement a specific quantum algorithm is estimated efficiently on classical machines. expected to deliver over a classical solution. For example, quantum computing’s technological advantage has Assessing technical feasibility already been demonstrated for two key tasks foundational for many algorithms—Fourier transforms and search.10 Even though quantum computing technologies are in a As a result, applications employing these tasks are nascent state, some algorithms, such as a quantum positioned higher on the Y-axis today. An individual approximate optimization algorithm (QAOA) or QSVM, have application’s quantum advantage may manifest in different shown potential to run better on near-term quantum ways. One example is a faster run-time to find a desired systems due to their shorter circuit-depth requirements, solution or a better approach to solving a problem that while other algorithms will need mature quantum systems achieves greater accuracy. to run more sophisticated problems.11

The X-axis: near-term technical feasibility

The quantum prioritization framework’s X-axis depicts the technical requirements for quantum hardware and software needed to successfully execute each identified application. A key aspect of this is the expected qubit and performance requirements. Placement on the X-axis is also impacted by further quantum hardware and software considerations, such as chip and algorithm design, qubit interconnectivity, number of gates and qubits used in the code, and the compiler’s efficiency.

Bubble size: business impact The third dimension of the quantum prioritization matrix is tailored to the size of the business impact each application is predicted to have for a specific enterprise. This dimension incorporates business metrics exclusively chosen by each organization. As part of each individual company’s selection process, it is important to realize that assessing business impact is more than merely measuring economic outcomes. Metrics should be a blend of market outcomes and competitive consequences, as well as financial impact. For example, depending on an organization’s strategic objectives, this dimension may include measures of value-chain enhancement, operational improvement, market disruption and/or innovation, market- share growth, revenue generation, cost reduction, and/or risk mitigation.

5 Business impact Quantum application

Quantum computers can transform business classification value chains, including mission-critical activities related to design, research, development, production, Employment of the quantum prioritization matrix elucidates distribution, and customer targeting and engagement. four quantum application categories: “Early Bloomer” applications, “Late Bloomer” applications, “Wild Cards,” and “Mature Industry” applications (see Figure 2). Identifying a diverse mix of these types of applications prepares your organization to respond rapidly to breakthrough advances in quantum computing technology.

Figure 2 Quantum application categories

Late Mature Bloomer Industry

Wild Early Card Bloomer Quantum speed-up

Near-term technical feasibility

6 Early Bloomer Wild Card Early Bloomer applications are the “no brainers.” Wild Card applications do not currently exhibit a These are useful today for businesses to experiment straight forward path to deliver the substantial with to help build talent because their solutions are quantum advantage of Late Bloomers, nor are they heuristic. Since Early Bloomer applications operate using as technically feasible as Early Bloomer applications are existing technology, their adoption is a profound step for today. While they may or may not ever pan out, evaluating organizations learning how to use quantum computing. The them helps organizations better understand how quantum use of these types of applications helps enterprises computing’s attributes could apply to their future success. understand how to integrate quantum computing into their These long shots are not to be completely counted out. As current business processes and build momentum for quantum technology evolves, some Wild Cards may additional quantum adoption. Adopting Early Bloomers transform into Early or Late Bloomers. initially may be critical to sustaining marketplace relevance, as they may establish the minimum requirements Mature Industry necessary to remain competitive. Mature Industry applications are the ultimate goal for businesses leveraging quantum computing. Late Bloomer Although no application has yet demonstrated Late Bloomer applications pose the “innovators quantum advantage at business scale, in the future—if dilemma.” They promise the greatest quantum quantum computers achieve sufficient scale and quantum advantage, but they require more advanced applications demonstrate competitive value—some will quantum technology to solve meaningful business confer business advantage, transforming company problems. Late Bloomer applications can potentially operating models and industry value chains. Some transform competition in particular industries through their applications already in development may be placing their potential to significantly impact business value in the creators on the path to significant marketplace success future. Because it is less clear when Late Bloomer even now. applications will become technically feasible, organizations need to keep a close watch on advancements in quantum computing. A new quantum algorithm or hardware approach could cause a Late Bloomer to leapfrog into technical feasibility. Due to their expected impact on company value chains, competitive success can accrue disproportionately to those companies that are first to recognize and implement Late Bloomer quantum computing applications.

7 Financial services institution: – Fraud detection and credit/asset scoring are solved with machine-learning algorithms for classification and “Applying the quantum prediction (QSVM). This type of algorithm can run on near- term quantum systems and may bring increased accuracy. prioritization matrix” However, the benefit needs to be proven as quantum system capacity increases, placing associated applications typically To illustrate how the quantum prioritization matrix works, as Wild Cards. let’s take the actual quantum application investigation undertaken by a financial services trading organization. The business value these applications might collectively This financial institution identified six potential uses of bring to the financial services industry could surpass USD quantum computing that are computationally challenging 10 billion in the first year of their launch.12 Enhancing fraud for conventional machines: detection and reducing monetary losses from money laun- 1. Trade settlement: Improving the process of transferring dering could deliver more than half of the total, with trade securities due to an asset trade, including reducing the settlement, portfolio management, derivative pricing, risk time it takes. analysis, and credit scoring making up the balance. 2. Portfolio management: Enhancing investment decisions to optimize returns and decrease risk. 3. Value-at-risk analysis: Strengthening risk mitigation by Figure 3 developing more accurate risk-simulation models. Quantum prioritization matrix applied to a financial services trading institution 4. Derivative pricing: Improving the pricing of financial assets using market-scenario simulations. 5. Fraud detection: Enhancing the detection of irregular Late Bloomer Mature Industry patterns to flag fraudulent transactions and imposters. 6. Credit/asset scoring: Strengthening the statistical analysis that segments customer financial solvency and 3 4 bond ratings. Each of these potential applications can be solved by a specific quantum computing algorithm that helps designate its level of quantum speed-up and its stage of technical 1 2 feasibility (see Figure 3): – Trade settlement and portfolio management can be solved through an optimization algorithm, QAOA. This type of algorithm brings a heuristic improved runtime and increased quality to the solution while running well on 5 6 near-term quantum systems, positioning associated applications as Early Bloomers. Wild Card Early Bloomer

– Value-at-risk analysis and derivative pricing are solved Quantum speed-up with a simulation algorithm, called quantum amplitude Near-term technical feasibility estimation (QAE), to estimate scenarios. This type of algorithm delivers a quadratic speed-up while improving Six quantum applications the quality of the solution. However, it requires mature 1. Trade settlement 4. Derivative pricing quantum systems. Applications associated with this 2. Portfolio management 5. Fraud detection algorithm are usually identified as Late Bloomers. 3. Value-at-risk analysis 6. Credit/asset scoring

Relevant algorithms QAOA QAE QSVM 8 Action guide 4. Determine the expected business impact. Overlay the size of the projected business impact by Charting a path to quantum readiness analyzing each application’s potential competitive advantage and expected financial benefits specific to your Using this methodology, we have identified five steps to organization. developing a quantum portfolio for your organization: 5. Plan for quantum adoption. 1. Acquire quantum capabilities. Determine whether you will purchase a quantum Identify the quantum skills your organization needs and computer or access the latest quantum technology determine whether to acquire them directly, hire a through a partnership arrangement. Plan for quantum’s consultant, and/or join an existing quantum ecosystem to impact on your internal workflows, including potential access them. process redesign and resource allocation adjustments.

2. Identify potential quantum applications. Select business problems or opportunities likely to benefit from the unique capabilities of quantum computing, such as those constrained by resources or by huge optimization calculations.

3. Position each application on the quantum prioritization matrix. Evaluate the technology profile of each proposed application, both in terms of potential quantum speed-up (Y-axis) and near-term technical feasibility (X-axis) based on state-of-the-art quantum hardware and algorithms.

9 About the authors The right partner for Dr. Elena Yndurain a changing world linkedin.com/in/elenayndurain/ At IBM, we collaborate with our clients, bringing together [email protected] business insight, advanced research, and technology to @yndurain give them a distinct advantage in today’s rapidly changing www.yndurain.com environment. Dr. Elena Yndurain leads financial services within the IBM Q consulting team helping clients get ready for IBM Institute for quantum computing. Business Value

Lynn Kesterson-Townes The IBM Institute for Business Value, part of IBM Services, develops fact-based, strategic insights for senior business linkedin.com/in/lynnkesterson/ executives on critical public and private sector issues. [email protected] @LynnKesterson For more information

Lynn Kesterson-Townes is Global Cloud and Quantum To learn more about this study or the IBM Institute for Computing Leader at the IBM Institute for Business Value. Business Value, please contact us at [email protected]. Follow @IBMIBV on Twitter, and, for a full catalog of our research or to subscribe to our monthly newsletter, visit: ibm.com/ibv.

10 Notes and sources 6 “Exploring quantum computing use cases for financial services.” IBM Institute for Business Value. 1 Deagon, Brian. “Quantum Computing Companies Aim September2019. https://www.ibm.com/thought-lead- To Go Where No Computer Has Gone Before.” Investor’s ership/institute-business-value/report/exploring-quan- Business Daily. February 2019. https://www.investors. tum-financial com/news/technology/quantum-computing-compa- 7 “IBM Working with Over 100 Organizations to Advance nies-aim-technology-higher/ Practical Quantum Computing.” IBM. January 2020. 2 Brisse, Matthew. “The CIO’s guide to quantum https://newsroom.ibm.com/2020-01-08-IBM-Work- computing.” Tech Radar Pro. September 06, 2019. ing-with-Over-100-Organizations-to-Advance-Practi- https://www.techradar.com/news/the-cios-guide-to- cal-Quantum-Computing-Signs-New-Collaborations- quantum-computing with-Anthem-Delta-Airlines-Goldman-Sachs-Wells-Far- go-Woodside-Energy-Los-alamos-National-Laborato- 3 “Quantum technologies: a jump to a commercial state.” ry-Stanford-University-Georgia-Tech-and-Sta Yole Développement. February 2020. https://s3.i-micronews.com/uploads/2020/01/YDR20062-Quan- 8 “Part One: Quantum Properties.” IBM. Accessed tum-Technologies-2020-Yole-Développement- January 2020. https://www.ibm.com/quantum-com- Sample.pdf puting/learn/what-is-quantum-computing/

4 Dr. Mounier, Eric. “Quantum technologies: a jump to 9 Sutor, Bob. “Scientists Prove a Quantum Computing a commercial state.” Yole Développement. February Advantage over Classical.” IBM. October 2018. https:// 2020. https://s3.i-micronews.com/uploads/2020/01/ www.ibm.com/blogs/research/2018/10/quantum-ad- YDR20062-Quantum-Technologies-2020-Yole-Dével- vantage-2/ oppement-Sample.pdf 10 Nielsen, Michael, Isaac Chuang. “Computation and 5 “IBM Working with Over 100 Organizations to Advance Quantum Information – 10th Anniversary Edition.” Practical Quantum Computing.” IBM. January 2020. Cambridge University Press. 2011. ISBN 978-1-107- https://newsroom.ibm.com/2020-01-08-IBM-Work- 00217-3 2010. ing-with-Over-100-Organizations-to-Advance-Practi- cal-Quantum-Computing-Signs-New-Collaborations- with-Anthem-Delta-Airlines-Goldman-Sachs-Wells-Far- go-Woodside-Energy-Los-alamos-National-Laborato- ry-Stanford-University-Georgia-Tech-and-Sta

11 11 Moll, Nikolaj, Panagiotis Barkoutsos, Lev S. Bishop, Jerry M. Chow, Andrew Cros, Daniel J. Egger, Stefan Filipp, Andreas Fuhrer, Jay M. Gambetta, Marc Ganzhorn, Abhinav Kandala, Antonio Mezzacapo, Peter Müller, Walter Riess, Gian Salis, John Smolin, Ivano Tavernelli and Kristan Temme. “Quantum optimization using variational algorithms on near-term quantum devices.” Quantum and Science Technology. June 2018. https://iopscience.iop.org/article/10.1088/2058- 9565/aab822; Havlicek, Vojtech, Antonio D. Córcoles, Kristan Temme, Aram W. Harrow, Jerry M. Chow, Jay M. Gambetta. “Supervised learning with quantum-en- hanced feature spaces.” Nature. 2019. https://arxiv.org/ pdf/1804.11326.pdf

12 “Exploring quantum computing use cases for financial services.” IBM Institute for Business Value. September 2019. https://www.ibm.com/thought-leadership/institute-business-value/report/exploring-quantum-financial

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